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2016 (4) TMI 187 - CESTAT MUMBAI

2016 (4) TMI 187 - CESTAT MUMBAI - TMI - CENVAT credit on the input used by the jobworker for the manufacture of goods on jobwork basis under Notification No.214/86-CE dated 25.03.1986 admissible - demand was raised for an amount equivalent to 10% of the value of the goods which was manufactured by the appellant on jobwork basis which was returned without payment of duty to the principal supplier of raw material in terms of Notification No.214/86 - Held that:- As per the condition of the Notific .....

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clearances. However, the amount of duty required to be paid will remain same as if no duty is charged at the jobworker end the same shall be available as CENVAT credit to the principal supplier of raw material. It is only for the convenience of the procedure, Notification 214/86 was issued and not to exempt any excise duty. Since the goods manufactured on jobwork basis is exempted on the ground that the excise duty is charged on the full value of final product wherein the value of jobwork goods .....

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- Appeal No. E/740/07 - Dated:- 13-1-2016 - MR. RAMESH NAIR, MEMBER (JUDICIAL) AND MR. RAJU, MEMBER (TECHNICAL) For the Petitioner : Ms. Anjali Hirawat, Advocate For the Respondent : Shri Ajay Kumar, Jt. Commr (AR) ORDER PER: RAMESH NAIR This appeal is directed against order-in-original No. 42/MS (31)/Commr/Rgd/06-07 dated 29.03.2007 passed by the Commissioner of Customs & Central Excise, Raigad wherein he confirmed the demand of ₹ 78,74,208/- under Section 11A(i) of Central Excise Ac .....

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of the value of the goods manufactured and cleared under Notification No. 214/86 on the ground that the goods so manufactured on jobwork basis is exempted from payment of excise duty therefore in terms of Rule 6 of Cenvat Credit Rules, 2004 the appellant is liable to pay 10% of the value of exempted goods and consequently whether the appellant is liable to pay 10% of the value of such exempted goods in terms of Rule 6 of Cenvat Credit Rules, 2002. 3. Ms. Anjali Hirawat, learned Counsel for the a .....

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tion No. 214/86. It is her submission that as per the said exemption the principal manufacturer undertakes to discharge the excise duty on their final product wherein the intermediary goods manufactured by the appellant are used. In such situation there is no exemption from payment of duty as the final product which is subsequently cleared by the principal supplier of the raw material are cleared on payment of duty. She submits that the issue involved has come up before this Tribunal and the Hon .....

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- 2007 (218) ELT 460 (Tri. Del) (c) CCE vs. Jainsons Wool Chambers Ltd. - 2010 (261) ELT 1015 (Tri. Del) (d) Sterlite Industries (I) Ltd. v. CCE -2005 (183) ELT 353 (Tri.LB) (e) CCE v. Happy Forging Ltd. - 2011-TIOL-34-HC-P&H-CX (f) Welspunn India Ltd. v. CCE - 2009 (248) ELT 898 (Tri. Ahmd.) 4. On other hand Shri Ajay Kumar, learned Jt. Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. 5. We have carefully considered the submissions made b .....

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ry goods is used. With this proviso it can be said that the goods manufactured on jobwork basis is exempted from payment of excise duty. It is that the Notification 214/86 only facilitates the principal supplier of raw material to avoid payment of duty at two stages, (1) at jobwork stage and (2) at the stage of final product clearances. However, the amount of duty required to be paid will remain same as if no duty is charged at the jobworker end the same shall be available as CENVAT credit to th .....

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se of the goods manufactured on jobwork basis under Notification 214/86. The relevant paras of the judgements relied on by the learned Counsel are reproduced below:- (a) Hwashin Automotive India Pvt. Ltd. 8. In Mahindra & Mahindra Ltd. (supra), the Tribunal observed that the amount paid in terms of Rule 6(3)(b) of CCR was for the adjustment of credit of inputs which went into the manufacture of exempted goods. This amount was collected towards the inadmissible credit availed by an assessee u .....

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n to the submissions, I find that the Larger Bench did not recognize job-worked goods as exempted goods for purposes of Rule 57C, which provision mandated that no credit of duty paid on inputs shall be allowed where the final product manufactured out of such input was wholly exempted from the payment of duty of excise leviable thereon or was chargeable to nil rate of duty. It was observed that, in the special procedure laid down under Rule 57F(3), duty did not get paid at the job worker s end at .....

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r Rule 57R. Thus, the Larger Bench decision operates in favour of the respondents. In the circumstances we find that the appellants were not required to pay an amount of ₹ 63,68,953/- along with interest of ₹ 50,352/-. They were eligible for refund of the same. As these amounts do not represent duty, the refund of the same need not be subjected to the procedure prescribe under Section 11B of the Central Excise Act. It is seen from the order of the original authority that the amount i .....

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ty on job work goods is on the manufacturer and not on the job worker. Therefore, in the present case before us, we observe that Electrical Stampings of Laminations and Aluminium Casting manufactured by the respondent on job work basis under Rule 4(5)(a) of Cenvat Credit Rules cannot be treated exempted goods and the recovery of the amount under Rule 6(3) of Cenvat Credit Rules is not sustainable. It is seen that the Tribunal in the case of Shree Rayalaseema Dutch Kassenbown Ltd. v. CCE, Tirupat .....

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ne - 2005 (183) E.L.T. 353 (Tribunal-LB) following the decision of Hon ble Supreme Court in the case of Escorts Ltd. v. CCE - 2004 (171) E.L.T. 145 (S.C.), held as under :- By applying the ratio of the above decision, it becomes clear that Modvat credit of duty paid on the inputs used in the manufacture of final product cleared without payment of duty for further utilization in the manufacture of final product, which are cleared on payment of duty by the principal manufacturer, would not be hit .....

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ides and perused the records. The dispute in this appeal is only for the period prior to 1-4-03 i.e. for the period from April-01 to March-03 when Rule 12B of the Central Excise Rules was not there. During this period, the respondent were receiving raw material from the principal manufacturers and were processing the same into woolen tops/woolen yarn by using their own inputs for which the Cenvat credit was being taken. The principal manufacturers were clearing the finished goods on payment of d .....

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en upheld by Hon ble Bombay High Court vide judgment reported in 2009 (244) E.L.T. A89. Hon ble Bombay High Court while upholding the Larger Bench of the Tribunal has observed that the Tribunal s judgment is in accordance with the law laid down by Hon ble Supreme Court in the case of Escorts Ltd. v. CCE reported in 2004 (171) E.L.T. 145 (S.C.). I also find that Hon ble Bombay High Court in a recent judgment in the case of Tata Motors Ltd. v. UOI reported in 2009 (244) E.L.T. 337 (Bom.) has uphel .....

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. The Revenue s appeal is accordingly dismissed. The Cross Objection filed by the respondent also stands disposed of as above. (d) Sterlite Industries (I) Ltd. 3. We are also in agreement with the appellant s contention that Rule 57C debars taking of credit in respect of the inputs used in the manufacture of the final product, if final product is exempted from the whole of duty of excise leviable thereon or chargeable to nil rate of duty. As such, to attract the provisions of Rule 57C, two situa .....

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te of the Ministries clarifications issued vide Circular No. 10/75/CX. 6, it was held that clearance under goods under provision of 191BB for export without payment of duty would not get covered by the above expression. Reference was made to the advice received from the Ministry of Law dealt in the paragraph of 9 in the said decision. It was opined in the said letter of the Law Ministry that the term exempted has a definite connotation. The same as attributed to the notification issued by the Ce .....

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oes not get paid at the job workers end at the time of clearance of the goods, but ultimately gets paid at the manufacturers end. In these circumstances, we are in agreement with the decision rendered in the case of Bajaj Tempo and Jindal Polymers. 3. Apart from the above two decisions, we also note that identical view was taken in the case of Shakti Insulated Wires Ltd. v. CCE & C, Mumbai-V [2002 (149) E.L.T. 668 (Tri.) = 2002 (51) RLT 115 (CEGAT-Mum)] & also in the case of CCEx, Jaip .....

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nt of duty by observing that since no duty was paid on the part at the time of clearance, Rule 57C will apply and no Modvat credit would be admissible. However, the said decision was subsequently reversed by the Supreme Court as reported in Escort v. C.C.Ex. [2004 (171) E.L.T. 145 (S.C.)]. For appreciation, we reproduce paragraphs 8 & 9 of the said decision. 8. It is to be seen that the whole purpose of the Notification and the Rules is to streamlines the process of payment of duty and to pr .....

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nal product. 9. In cases of manufacturers like the Appellants the final product is the tractor. The intermediate product would be parts which are manufactured for being used in the tractor. In such a case the parts would not be the final product. Thus Rule 57C would have no application. The mere fact that the parts are cleared from one factory of the Appellants to another factory of the Appellants would not disentitle the Appellant from claiming benefit of Notification No. 217/86-C.E., dated 2nd .....

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it by provision of Rule 57C. Inasmuch as, the matter stands decided by the Honourable Supreme Court, we would hold in favour of assessee. 5. As regards the decision in the case of Alpha Lavan laying down that the Modvat credit could be claimed in such a situation, we find the earlier decision of the Bajaj Auto was not followed. However, in view of the facts that the ratio of Bajaj Auto decision stands approved by the Supreme Court decision in the case of Escort Ltd. referred supra, we are of the .....

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unal erred in upholding the view taken by the adjudicating authority. Reliance has also been placed on judgment of the Honble Supreme Court in CCE v. Ballarpur Industries Ltd. (2007)8 SCC 89. 6. We are unable to accept the submissions. While there is no dispute that under Rule 6(1) of the Rules, Cenvat Credit cannot be availed in respect of inputs used in manufacture of exempted goods, the same has to be read with the notification referred to above. Learned counsel for the appellant is not able .....

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s been extracted hereinabove, shows that in the manufacture of a final product an intermediate product may also come into existence. Thus in cases where an intermediate product comes into existence, even though no duty has been paid on the intermediate product as it is exempted from whole of the duty or is chargeable to nil rate of duty, credit would still be allowed so long as duty is paid on the final product. 9. In cases of manufacturers like the appellants, the final product is the tractor. .....

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factory of production or in any other factory of the same manufacturer. 10. Mr Lakshmikumaran relied upon the decision of this Court in the case of CCE v. Hindustan Sanitaryware & Industries (2002) 7 SCC 515, wherein in respect of this very notification, this Court has held that so long as duty is paid on the final product, the mere fact that duty was not paid on the intermediate product would not disentitle the manufacturer from the benefit of Notification No. 217/86-CE dated 2-4-1986. In t .....

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ts used for manufacture of parts, so long as the parts are used in the manufacture of tractors on which duty is paid. We clarify that in respect of parts which are sold in the open market and/or used for manufacture of tractors on which no duty is paid, the benefit of Notification No. 217/86-CE dated 2-4-1986 may not be available. As regards the judgment of the Hon ble Supreme Court in Ballarpur Industries Ltd., therein the issue was not of effect of the notification dated 25.3.1986, which has b .....

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